How Does Perceived Integrity in Leadership Matter to Firms in a Transitional Economy?

Perceived integrity of managers affects employee attitudes. Yet its impact on employee behavior and organizational performance is unknown. Addressing this gap, we examine the effect of perceived integrity in leadership on both subjective firm performance and objective employee productivity. Applying dynamic capabilities theory, we propose that perceived integrity in leadership may not only directly affect the outcome variables but also moderate the effect of the firm’s multiple-strategy implementation on outcome variables. We test the hypotheses using multiple informants from a transitional economy with an ineffective legal and incomplete institutional environment, which could seriously challenge the leader’s commitment to integrity. As hypothesized, perceived integrity is associated with manager’s perception of firm performance directly and objective employee productivity through its moderating role in the firm’s implementation process of dual strategies. The results illustrate that perceived integrity in leadership plays as an important driver for employee productivity in dual-strategy and non-strategy firms. We provide detailed discussions about the integrity challenge and call for additional future research on this topic.